Tipped as future CEO, Richemont watches boss in surprise early exit

July 14, 2017

Georges Kern, tipped as a potential chief executive of Chloé and Alaia owner Richemont, left the luxury goods group abruptly on Friday just four months after taking over as head of its watchmaking division, with reports that he is embarking on a project to boost the Breitling brand.

IWC

The departure of Kern, who had been at Richemont for 17 years, is a blow after the maker of Cartier, IWC, Montblanc and other top brands recently moved to a new management structure that split the top role between a handful of heir-apparents to the post.

Swiss newspaper Le Temps reported that Kern had now taken a stake in rival Swiss watchmaker Breitling and planned to try to revive that brand. Breitling declined to comment on the report but Richemont seemed to confirm it.

"Georges has been offered an interesting opportunity to become an entrepreneur," chairman Johann Rupert said in a statement. "He has had a very successful career at IWC Schaffhausen and we wish him well."

Kern, who steered IWC for 15 years, was previously seen going head-to-head for the CEO job with former Montblanc executive Jerome Lambert. "Kern was touted as a potential future CEO of the group but the company has recently moved to a committee structure after Richard Lepeu retired as CEO," Kepler Cheuvreux analyst Jon Cox said. "He may have just thought the structure wasn't for him."

In a reshuffle announced last November, Lambert assumed responsibility for all businesses outside jewellery and watchmaking, while Kern was appointed head of watchmaking, marketing and digital. They assumed their new roles just under four months ago.

Richemont's other watch and jewellery brands include Jaeger-LeCoultre, Van Cleef & Arpels and Piaget. Luxury watchmakers have been struggling with dwindling demand in their biggest markets, Hong Kong and the US, and growing competition from the likes of Apple.

CHANGE AT THE TOP

The unconventional move to abolish the top executive role came as part of leading investor Johann Rupert's efforts to refresh the Geneva-based group's ageing management team and board.

Rene Weber, a luxury specialist at Swiss bank Vontobel, said rumours had been circulating about Kern's possible departure for months, making his resignation only "half a surprise". "We recognised (Kern) as a strong leader and an emotional person, who could also sometimes cause friction," Zuercher Kantonalbank analysts said in a note on Friday. "Apparently, the new role didn't allow him to fulfil his potential."

The group has been hard hit by a severe and prolonged watch industry downturn, which saw Richemont's timepiece sales - accounting for just under half of group revenue - plummet 15% last year.

Despite some recovery in recent months, Richemont in May struck a cautious note, citing worries over volatile geopolitical and trading climates.

Analysts said they didn't see Kern's departure as a reflection of any underlying problems with the watchmaking division."We don't assume the abrupt shift is related to any deterioration in the watch business," Zuercher Kantonalbank analysts said, pointing to recent improvements in Richemont's watch sales.

Watchmaking, as well as marketing and digital activities, will now report directly to the senior executive committee, Richemont said.

Cartier-maker Richemont said its sales rose by a better-than-expected 12 percent at constant currency in the five months to Aug. 31, helped by easy comparables and a strong performance in its jewellery business.

Sales of LVMH's watch brands could maintain their double-digit percentage growth in the second half of 2017, despite tougher year-on-year comparisons, the head of the luxury company's watch business said on Thursday.